Experts warn the announcement of an increase in the rate of Value Added Tax from 5% to 7.2% will lead to closure and eventual demise of many businesses in Nigeria.
Experts and groups such as the Nigeria Employers’ Consultative Association have said the recent increase in the Value Added Tax rate from five per cent to 7.2 per cent will lead to closure of many businesses.
The Head of Tax and Corporate Advisory Services at PricewaterhouseCoopers, Taiwo Oyedele, said the new VAT rate would shrink the GDP growth and disposable income of Nigerians.
The Director-General of NECA, Mr Timothy Olawale, noted that the timing of the increase in VAT rate was wrong, stressing that the government ought to support businesses in reducing the alarming unemployment rate in the country.
Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed, on Wednesday announced the VAT rate increase at the end of the Federal Executive Council meeting.
“If this new VAT rate is implemented, the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high and could lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming.
“Furthermore, the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the VAT, further reducing the purchasing power of the citizens, leading to increase in prices of goods and services. It will result in upward movement of the inflation rate, and further contraction of the economy.”
Olawale who was speaking in Abuja noted that the recently released data of the country’s Gross Domestic Product indicated a contraction in the past two quarters (Q4 2018, 2.38 per cent; Q1 2019, 2.10 per cent and Q2 2019 1.94 per cent).
Rather than increase the VAT rate at this point, he said countries should be formulating fiscal policies to stimulate their economies.
“Therefore, this suggests that at this period of time, countries should be formulating fiscal measures/policies to stimulate their economies,” he stated.
Olawale, who said that in the event that the government must increase VAT rate against the will of the people, it should have been limited to luxury or ostentatious goods.
CobraReview invites Readers, Product enthusiasts and consumers to send in their independent reviews of products/services and their experiences to firstname.lastname@example.org for free and instant publication.
READ ALSO! Prostate: What Many Men Don’t Know!